ESMA and EBA publish the first drafts of regulatory technical standards under MiCA

17 July 2023 6 minutes

We recently published a news item on the entry into force of the Regulation on Crypto Asset Markets (MiCA), which will become applicable in two phases. Some MiCA parts will already become applicable on 30 June 2024 and MiCA will be fully applicable from 30 December 2024. MiCA introduces within Europe a unified financial supervisory law framework for providers/issuers of various types of crypto assets on the one hand and crypto asset service providers (so-called CASPs) on the other.

Under MiCA, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have been assigned important tasks. These include the drafting of regulatory technical- and implementing standards and guidelines that will provide further detail on various elements that MiCA regulates only in outline. These regulations are also known as ‘Level 2’ regulations and, in practice, largely determine the specific rules that market participants have to abide by.

Publication of first drafts of regulatory technical standards

On 12 July 2023, both ESMA and EBA published in draft the first regulatory technical standards under MiCA. This takes place in the form of consultation documents, giving market participants the opportunity to provide substantive feedback on them. ESMA and EBA will take this feedback into account when finalising the consultation documents, ultimately resulting in delegated and implementing regulations that will have a direct effect within Europe. Below, we elaborate on these first draft regulatory technical standards under MiCA.

ESMA consultation paper

The first MiCA consultation paper published by ESMA concerns regulatory technical standards that will further detail specific requirements under MiCA. These cover the following topics and are relevant to CASPs:

content, forms and templates for notification by so-called ‘certain financial entities’ (these include credit institutions, investment firms and central securities depositories and electronic money institutions seeking to provide crypto asset services);
content, forms and templates for licence application by CASPs;
complaint handling procedures by CASPs;
the identification, prevention, management and disclosure of conflicts of interest by CASPs; and
assessment of proposed acquisitions of, in short, ‘qualifying holdings’.

These (and future) ESMA regulatory technical- and implementing standards, once they become applicable, will, among other things, directly prescribe what policy documents and internal procedures of CASPs should comply with.

ESMA wishes to receive all feedback on its first consultation paper under MiCA no later than 20 September 2023. ESMA is expected to publish its final report and submit these regulatory technical standards to the European Commission for endorsement by 30 June 2024. In this way, the aim is to also ensure that the new regulatory technical standards come into force when the relevant MiCA sections become applicable.

EBA consultation documents

On 12 July 2023, EBA also submitted several regulatory technical standards for consultation. These are the following consultation documents:

Consultation document containing regulatory technical and implementing standards covering information for the application for authorisation by issuers of ‘asset-related tokens’ (so-called ARTs) under MiCA;
Consultation document containing regulatory technical standards covering information for the assessment of a proposed acquisition of a ‘qualifying holding’ in issuers of ARTs; and
Consultation document setting out regulatory technical standards for complaint handling procedures for issuers of ARTs under MiCA.

Each of these regulatory technical standards relates to issuers of ARTs, one of the MiCA components for which EBA will be the relevant financial regulator at the European level. These regulatory technical standards listed above are briefly discussed below. For each consultation document, market participants will have the opportunity to respond to it in substance until 12 October 2023.

Technical regulatory and implementation standards license application

These regulatory technical standards cover information for applying for an authorisation to offer ARTs to the public and for their admission to trading, respectively. They specify the content of the information of such a licence application and cover, inter alia, the issuer, its intended activities (including a business plan), internal governance arrangements and control framework, liquidity management and the suitability and reliability of the management body and the reliability of qualifying shareholders.

The draft Implementing Technical Standards (ITS), which are also part of the consultation document, further complement the regulatory technical standards described above and contain templates (letter and application form) for submitting the licence application for offering ARTs to the public or admitting them to trading.

Regulatory technical standards intended qualifying holding

These regulatory technical standards cover information for the assessment of a proposed acquisition of a ‘qualifying holding’ in an issuer of ARTs. They specify the detailed content of the information to be submitted when notifying direct or indirect acquisitions or increases of qualifying holdings in such issuers. This concerns information necessary for the prudential assessment of the proposed acquisition or increase of a qualifying holding.

This information includes five criteria relating to (i) the reputation of the proposed acquirer, (ii) the suitability of persons who will manage the target company, (iii) the financial soundness of the proposed acquirer, (iv) the sound and prudent management of the target company after acquisition and (v) suspicions around (attempted) money laundering or terrorism financing and whether this may increase after acquisition. These requirements are in line with the regular DNO requirements for other financial undertakings such as banks, payment institutions and electronic money institutions.

Technical regulatory standards complaint handling

These regulatory technical standards are intended to start ensuring prompt, fair and equal treatment of complaints filed by holders of ARTs and other stakeholders with an issuer of ARTs. Unlike ESMA’s draft regulatory technical standards on complaint handling, these regulatory technical standards of EBA specifically address the complaint handling procedures that MiCA prescribes for issuers of ARTs. This, therefore, concerns a different complaint-handling procedure than that for CASPs.

These regulatory technical standards provide further definitions of complaints and complainants and describe requirements for policies and procedures around complaint handling and the provision of information to holders of ARTs (and other stakeholders) in connection with such complaint handling. It also describes the format of the complaint form by which holders of ARTs can submit a complaint to their issuer.

Further (timing) implementation measures

Until MiCA’s full entry into force, both ESMA and EBA will still publish several new draft standards. For instance, ESMA aims to eventually publish three consultation packages, of which the ESMA consultation paper discussed above is the first in line. The second and third packages are expected in October 2023 and the first quarter in 2024. ESMA has further explained on its website what these consultation packages will consist of which can be read back here. EBA also has a significant role to play, as EBA has been mandated under MiCA to develop a total of seventeen (17) regulatory technical standards and guidelines further detailing the requirements for ARTs and ‘e-money tokens’ (so-called EMTs).

Within Finnius, we are keeping a close eye on the developments around MiCA and will publish further news releases about it. If there are any intermediate questions on your side already, feel free to reach out to us. We are pleased to prepare you well for the upcoming MiCA era.